January 24, 2020

The US IBOR transition has a long way to go

Statistics on the US IRD market show that alternatives to USD LIBOR have yet to pick up any appreciable volume.

An ISDA analysis of data from with the DTCC US SDR show how skewed the market is towards USD LIBOR. By trade volume or notional we see that USD LIBOR outstrips other indices massively. The data from DTCC covers the last calendar year, not all outstanding trades. It is clear that the market needs to find a new reference rate very soon, and begin migrating not only the 683,146 trades executed in 2019 but all the previous business too.

The SEC recommends SOFR as the replacement rate in this announcement.

From the ISDA Website

The ISDA Interest Rate Benchmarks Review analyzes trading volumes of interest rate derivatives (IRD) transactions in the US referencing the Secured Overnight Financing Rate and other selected alternative risk-free rates, including the Sterling Overnight Index Average, the Swiss Average Rate Overnight, the Tokyo Overnight Average Rate and the Euro Short-Term Rate. In addition, the report analyzes IRD traded notional referencing the London Interbank Offered Rate denominated in US dollars, sterling, Swiss franc, yen, euro, as well as EURIBOR and TIBOR.

This report uses data from the Depository Trust & Clearing Corporation swap data repository. It therefore only covers trades that are required to be disclosed under US regulations.

The report can be found on the ISDA website here. 

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